Home purchase restrictions were eased in both Beijing and Shanghai to stimulate the local real estate markets and boost confidence in the industry’s recovery. The Beijing municipal government issued a notice redefining ordinary housing and personal home loans. New measures lowered the down payment on first homes to 30% from 35% for ordinary housing and to 30% from 40% for non-ordinary housing. The minimum down payment ratio for second homes is reduced to 50% from up to 80% in the six districts in the downtown area, and to 40% from up to 80% in the six districts in the suburban area. Shanghai introduced similar policy changes, including lowering the minimum first-home down payment ratio to 30% from 35%, that for second homes to 50% from up to 70% in urban districts, and to 40% from 70% in the city’s six suburban districts. More residential properties are now eligible to be identified as ordinary housing, which will allow them to enjoy value added tax (VAT) exemption if the ownership period exceeds two years.
“Both Beijing and Shanghai used to have stringent requirements for home purchases. But the latest measures are in line with market expectations. The new policies will greatly lower home purchase costs, stimulate market activities, help stabilize home prices, facilitate the recovery of industry confidence and stabilize the housing sector nationwide,” said Chen Wenjing, Director of Research at the China Index Academy. Beijing’s new rules also extended the maximum loan tenure from 25 years to 30 years, lowered minimum interest rate requirements for both first and second homes, and extended the definition of ordinary housing. For example, in Beijing, in the past, ordinary housing was supposed to be no bigger than 140 square meters; now, however, flats sized 144 sq m or smaller can be regarded as ordinary housing.
According to Yan Yuejin, Director of Shanghai-based E-house China Research and Development Institution, the previous definition of ordinary housing in Beijing was finalized in 2014, but due to the continued rise in home prices over the past few years, a number of apartments can no longer be called ordinary housing, which means more down payment and more taxes for homebuyers. “Communications with our customers showed that both home sellers and home buyers are becoming more optimistic,” said Wang Guohui, Senior Agent with Sinyi Realty in Shanghai.
Some 5.3 percentage points of taxes and additional fees would be saved for apartments regarded as ordinary housing, according to the new standards, said Yang Yulei, Chief Analyst with the Shanghai Lianjia Research Institute. According to Yang, a person or family buying a flat as a second home in Shanghai’s urban area, with a 30-year home loan of CNY3 million, can save CNY16,392 annually following the policy adjustment.
The nation’s 70 major cities saw their home transaction volumes grow in November, and their home prices had a mixed year-on-year performance last month, said Shen Yun, Senior Statistician with the National Bureau of Statistics’ Urban Division. According to data from the Ministry of Housing and Urban-Rural Development, from January to November, the proportion of pre-owned home transactions nationwide in total transactions reached a historical high of 37.1%. The transaction volume of pre-owned homes has surpassed that of newly built residences in seven provinces and municipalities, the China Daily reports.
